Written by Gary
Opening Market Commentary For 03-21-2014
Premarkets melted up (+0.16%) from yesterday's close on no new financial news except the euphoria from investors leftover exuberance.
Markets opened on a high note swiftly moving upwards to +0.50% in the first few minutes on strong green volume. The SP500 tested its historical high within the first 5 minutes and topping it by 40 cents (1883.97) and then backing off on falling volume.
By 10 am the averages moved off their morning attempt to prod investors in the arse and settled for lower numbers.
The short term indicators are leaning towards the hold side at the opening. The all important signs of reversal, up or down, have not been observed so we are mostly, at best, neutral and conservatively holding. The 50DMA, MACD, volume and a host of other studies have not turned, only a 6% correction (and recovery) and that is not enough for me to start shorting. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 72 % sell.
In looking at the 50 DMA the current SP500 is above that line, but way above the 200 DMA and on 02-06-14 crossed above the 100. I can not see, as of right now where the MA's are rolling over to indicate any permanent bear run in fact quiet the opposite. The longer MACD view is still running uphill and has not turned. The 50 DMA is flatting slightly, but not descending which is always the first sign the bears are smacking their lips in anticipation of a medium rare steak.
I still believe that Mr. Market is STILL not through playing with us and even newer historical highs are a distinct possibility beyond what we have seen, mainly because the amount of bond buying the Fed still does on a monthly basis. For those who are hell-bent bears, this article, 5 Reasons Your Simple Bear Market Plans Could Backfire, should be required reading.
It is its ending of QE that worries me the most as many financial institution and emerging markets can not continue to push forward or upwards without the Fed's 'Market Viagra'. Even if the Fed reduces its purchases by $10 billion every month for the rest of 2014, the Fed will have acquired $320 billion more for its portfolio. Note, that in 2013, the Fed added more than $1.0 trillion in securities to its portfolio. The debt stands at 4 trillion and will be at 5 trillion by the time the taper is completed and that is one hell of a debt that 'someone' has to pay.
The longer 6 month outlook is now 40-60 sell and will remain slightly bearish until we can see what the effects are in the Fed's 'Tapering' game plan. Again, I would also take chart and other technical indicators with a lessor degree of reliability for the time being and watch what the Janet Yellen's Fed does over the next couple of months. All she did in the February testimony to a Senate panel is flap her lips but the charts and other technical indicators completely failed us this time around. Read at DailyFX, "wouldn't it be easier if the Fed would just announce the proper level for the S&P and spare us all the policy announcements and market gyrations?"
Several notes of negativity are that the daily volume is very low matching the period of historical highs in the past which could set the stage for addition weakness and market decline. The markets are oversold and the margin debt for stock purchases are at an all time high. Investors are also worried about issues directly related to the Fed's tapering and are considering this factor along with the Argentine Peso, South African Rand and the Yen. And of course, China's defaulting businesses are dropping like flies.
The Ukraine/Crimea situation is a symptom, not a cause of the current market weakness, it is China that is more of an issue with some resent defaults raising an eyebrow or two. Some are expecting a brief 'relief' rally after Ukraine/Crimea tensions have been reduced through diplomatic efforts - NOT! The problems will not end there.
If the Russian President Putin stops at annexing Crimea, the markets may alleviate current weakness and the bull run will continue as some bullish pundits seem to indicate. It is also possible that this is simply a pause where Putin will take the slack time to consider his next global conquest. One of the many issues investors face is that a Reuters article suggests that tensions in Eastern Europe/Central Asia aren't going away as Russian posturing persists in spite of Russian Propaganda.
The real story behind the current weakness is the US weak housing, layoffs and poor employment data, inventory reductions and soft economic outlook including a mediocre sales outlook.
My inner instincts tell me there is a distinct possibility that the Keynesian's are going to be reluctant to stop their grand financial experiment and will want to taper the taper or expand the program later in the year. After hearing Ms. Yellen speak 2-27-2014, I am more sure of it happening. Also, watch for QE5 when Obamacare starts drags the economy down into trouble in 2015.
But at the same time, many pundits have stated that we may have seen the top - but I wouldn't count it as long as the Fed continues to hand out 'Market Viagra', even if it is being reduced somewhat! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume to signify a market top.
The Best Stock Market Indicator Update says the market is untradable. The OEXA200R ended the week at 80%, down from 82% last weekend.
Of the three secondary indicators:
- RSI is NEGATIVE (below 50).
- MACD is NEGATIVE (black line below red).
- Slow STO is POSITIVE (black line above red).
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The DOW at 10:00 is at 16404 up 73 or 0.45%.
The SP500 is at 1880 up 8 or 0.42%.
SPY is at 187.62 up 0.70 or 0.38%.
The $RUT is at 1201 up 1.52 or 0.13%.
NASDAQ is at 4304 down 15 or -0.35%.
NASDAQ 100 is at 3676 down 19 or -0.50%.
$VIX 'Fear Index' is at 14.34 down 0.17 or -1.17%. Bullish Movement
The longer trend is up, the past months trend is positive, the past 5 sessions have been mixed and the current bias is negative.
WTI oil is trading between 98.26 and 99.65 today. The session bias is positive and is currently trading up at 99.41.
Brent Crude is trading between 106.01 and 107.42 today. The session bias is positive and is currently trading up at 107.25.
Gold rose from 1329.72 earlier to 1343.00 and is currently trading up at 1338.10. The current intra-session trend is elevated, but sideways.
Dr. Copper is at 2.955 rising from 2.916 earlier.
The US dollar is trading between 80.50 and 80.18 and is currently trading down at 80.21, the bias is currently negative.
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Written by Gary